The picture looks better for the American tech giants known as the FAANG stocks than it did a few months ago. And for some of these names there could be a lot more upside to come, say wealth managers Matt Maley and Mark Tepper, who both have their favourites when it comes to the FAANGs.
Last year proved to be an up-and-down one for the FAANG stocks, which includes Facebook, Amazon, Apple, Netflix and Alphabet. All five stocks rose sharply over the first half of 2018 only to fall precipitously starting in October as the sector endured a major selloff.
But since then, the FAANGS have turned it around, all of them posting strong gains since their late-December lows and together adding a remarkable $600 billion in market cap over recent months.
What’s on tap for Q2? For a couple of names, Facebook and Netflix, the jury is still out, says Maley, managing director and equity strategist at Miller Tabak.
On a technical analysis, you always want to have an opinion one way or the other but sometimes you have to sit back and wait a little bit, and I think that’s going to be key for Facebook and Netflix,” says Maley, on CNBC’s Trading Nation on Tuesday.
“Netflix had this huge run in January along with everyone else but then it kind of got stuck in a sideways range and we’re right in the middle of that and until we really get a breakout it’s going to be hard to determine which way it’s going to go,” Maley says. “We’ve got earnings coming out in the next two weeks and I think we’re going to have to wait for those to see what’s really going to happen.”
“Facebook has been very similar with a very sharp bounce and then a sideways range, but now it’s starting to break out of the top end of that range. That’s very bullish and should help the stock. The one thing we have to be careful about is that it reports in a week and every single time in the last five quarters it has seen a huge gap, in either direction, right after that report. So we have to be a little bit careful,” he says.
While Netflix has posted the biggest gains since its December lows at 57 per cent, Facebook is up 45 per cent, Apple is up 40 per cent, Amazon is up 41 per cent and Alphabet is up 23 per cent.
Strategic Wealth Partners’ Mark Tepper contends that while he’s bullish on both Netflix and Google, it’s Amazon who is the clear winner of the group.
“Whenever growth is scarce, investors tend to flock towards companies and industries that are outgrowing the S&P 500. There’s no question about it, we are in a slow-growth economy right now, and there’s not a company in the FAANGS that’s growing faster than Amazon,” Tepper says on Trading Nation.
“They are the biggest player in providing cloud infrastructure as a service to enterprise customers, and that’s their high-margin business and it’s growing at over 40 per cent annually,” he says. “Then you throw in the profit tailwinds coming from advertising and there’s no doubt about it that they’re taking ad dollars from Google and Facebook.”
“The way I look at it is that you have a company here with Amazon that should not be trading at ten per cent off its all-time highs when the S&P is maybe two per cent off right now. So, Amazon is our pick,” Tepper says.